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Thursday, February 28, 2013

When I first heard about Intelligize, I have to confess. I rolled my eyes and groaned at the thought of yet another securities research product. What in the world could be new in the over populated territory of securities research products? But the rumors were persistent, that this product did something new. Intelligize could save a lawyer hours of research time. I took a look and blimey... There was something new in securities research!

Painful Research as the Mother of Invention

Gurinder Sangha

Intelligize is the brainchild of Gurinder Sangha a former corporate associate at Shearman & Sterling and White & Case. In 2007 he left the practice of corporate law, retreated into his apartment and began developing a " better way to conduct securities research". He wanted to apply what he calls the "Apple approach" to legal research. He defines the "Apple approach" as creating a complex product with a simple intuitive interface which requires no training manual.

The traditional approach to research starts with a broad search of all documents which is then narrowed with a series of sub-searches. Sangha decided to turn the process on its head. He developed a search engine with the ability to search by deconstructing documents. Start with the best document and then expand your search by finding more documents or clauses like the original document or clause..

Sangha had a great idea, but as we all know, building the technology for a start-up requires some angels for funding.

Every Start up Needs an Angel

The first potential investor Sangha attempted to contact was Phil Brown, the founder and former CEO of Global Securities Information (GSI). GSI, one of the grand daddies of the securities research business, started in the pre online world of the early 80's.The technology involved a telephone, a photocopier and a chair in reading room at the Securities and Exchange Commission Office in downtown DC. Brown grew GSI into one of the most successful and respected SEC research providers. He sold the company to Thomson Reuters in July 2005. They re branded product as Westlaw Business, a company which remains a competitor to Intelligize. Since Brown was under a non-compete agreement, he was unable to discuss Sanga's venture until his non-compete expired.

Before GSI was sold, Brown wanted to tackle SEC comment letter research. but Brown admits he could not figure out how to link the series of communications in comment letter chains of correspondence. The challenge wasn't just linking the relationship between the letters, but identifying and matching the question and answer pairs through a series of letters. Nonetheless. Brown had unknowingly contributed to the creation of one of the key components of the Intelligize product. In 2004, GSI made the FIOA request which led to the public release of the entire SEC comment letter archive. The documents were now available to all, but still difficult to research.. A lawyer who conducted a keyword search of comment letters, might have to review hundreds of letters including many irrelevant documents before reconstructing the thread of communications in which the SEC responded to the issue of interest to the lawyer.

When Phil's non-compete expired, he agreed to meet with Sangha but he was initially extremely skeptical that Intelligize had anything new to offer. By the end of the meeting Phil was convinced and ready to invest.

The First "Killer App:" The Precedent Analyzer

From his own experience as a "big law " associate, Sangha knew that one of the most challenging securities research tasks facing a corporate associate was reviewing precedents of specific clauses within SEC filings. If for example, you wanted to research precedents for a particular risk factor, you would have to flip through each registration statement one at a time to locate and read that risk before moving on to the next document. As a result, it was very challenging to quickly analyze and synthesize multiple precedents. Sangha's technology broke apart SEC filings down to the clause level. For the first time a lawyer could easily review the same clause form multiple flings simultaneously on one screen.

The Intelligize Products. Since the release of the precedent analyzer in 2009, Sangha has added 7 more products which apply his search technology to new data sets and provide new and improved workflows for analysing SEC research documents. Here is a brief summary of the Intelligize products released since 2009

Comment Checker Next Sangha tackled the SEC staff review process. Preparation for the staff review normally involves locating and organizing coherent threads of inquiries and responses from SEC Staff in comment letters. Sangha's technology blew apart the documents and identified the threads of issues through chains of correspondence. For the first time a lawyer could easily identify the question and answer pairs that threaded thorough a long chain of correspondence. Comment Checker pulls together all publicly disclosed SEC comments and responses including over 1.2 million comments from more than 5,000 public companies. It is the only tool that provides the entire chain of communication between the SEC and a company for each comment (including follow-up comments/responses) on one screen. Released in 2009.

Precedent Analyzer The most efficient tool in the marketplace for analyzing multiple SEC fillings and isolating what’s market, what’s new and what’s changing (e.g. the program can simultaneously analyze the Competition risk factor from 10 different companies and show what’s been updated). Released in 2009.

SEC Checker pulls together all publicly disclosed SEC filings and related documents. Using our patent-pending processes, we’ve organized, reformatted, and indexed all of this information – enabling you to search, filter, compare, copy, and assemble content for internal or client review. Allows you to compare year over year changes. Automatically links to all underlying filings which are incorporated by reference. As far as I know - this is the only product that automatically links to documents "incorporated by reference" in SEC filings.

No Action LetterDatabase Full-text searchable database of No Action Letters and SEC responses which lets you research Reconsideration Requests and Shareholder Proposals. Released in 2011.

Memos Database The largest and only fully-text searchable database of law firm and accounting firms memos in the marketplace. It includes over 150,000 memos written by over 100 law firms. Released in 2011.

M&A Researcher. Helps you easily analyze M&A deal terms from over 10,000 transactions (e.g., you can easily pull up all “Go-Shop” language where Wachtell is the target’s counsel). They plan to add documents going back 10 years. Released in 2012.

Agreement Checker The only product that can run searches within specific clauses and sub-clauses for any type of contract (e.g., you can research the notice periods within each termination clause in all public license agreements to see what’s standard). It blasts apart documents and allows law firms to identify their own standard clauses or review clauses prepared by other law firms. To support this product, they have created a taxonomy allowing lawyers to navigate form to the appropriate clause or language. Takes a more granular approach to analyzing documents. Released in 2012

Tapping the Librarian Brain Trust

Sangha worked closely with early adopter firms such as Skadden, Latham and DLA Piper. Those firms provided valuable feedback for enhancing products. In particular, he regards law librarians as a special product development "brain trust" who he credits as the source of major enhancements in content and functionality.

Now More Than Ever

Sangha's immersion in SEC research has provided him with some interesting insights. According to Sangha, recent changes in SEC regulations, have resulted in an explosion in the size of SEC filings. According to Sangha's analysis of public filings, all 3 major filings (10Ks, 10Qs and Proxy Statements) have doubled in length in the past 10 years. Proxy Statements in particular are becoming the primary form for disclosure of major issues. Since the SEC has increased penalties, Intelligize can be positioned as a tool for helping clients mitigate increasing risk exposure. This issue is detailed in a recent Intelligize "white paper" on risk. .And of course Gurinda is pleased to point out that Intelligize's powerful search engine can help lawyers analyze and compare this ever growing database of filings.

The Business Model

Sangha plans on growing revenue by creating value. That value includes adding new products, content and functionality, rather than focusing on steep price increases to meet revenue targets. I can already hear law firm librarians cheering!
_______________________________________________________________The Last Independents Standing: This is the first in an occasional series on legal information companies which are not owned by one of the major legal publishers.

Tuesday, February 12, 2013

On Friday, Judge Rakoff tossed out the lawsuit brought by intellectual property lawyer Edward White last year against Lexis and Westlaw, according to a story in Thomson Reuters News and Insight. White claimed that Lexis and Westlaw had violated copyright law by including his copyrighted legal documents in their online services.( Edward White v. West Publishing Corp, U.S. District Court for the Southern District of New York, No. 12-1340.)

In a brief ruling, U.S. District Judge Jed Rakoff dismissed White's lawsuit against Thomson Reuters Corp, which owns Westlaw and Reed Elsevier Plc, which owns LexisNexis. Rakoff said that his reasoning for dismissing the lawsuit would be laid out in a subsequent opinion.

The lawsuit was initially filed in 2012 by White and Kenneth Elan, a solo practitioner based in New York.

According to the complaint, both companies had engaged in "wholesale unlawful copying of attorneys' copyrighted work, bundled those works into searchable databases, and sold access to those works in the form of digitized text and images for huge profits."
The lawsuit had originally sought class action status on behalf of two groups of lawyers: those who registered their documents with the U.S. Copyright Office and those who did not.

Last May, Rakoff dismissed Elan from the lawsuit and struck the proposed subclass of lawyers who had not copyrighted their legal filings.White then filed an amended complaint, which dropped the class certification request and sought an unspecified amount of damages based on the inclusion of his copyrighted legal briefs in Westlaw's "Litigator" and LexisNexis's "Briefs, Pleadings and Motions" databases.

A Victory for Fair Use and Common Sense. Westlaw and Lexis in a rare showing of unity, both claimed their actions were protected by the "fair use" exception in US Copyright Law. They also argued that their use of the documents was "transformative," because they had enhanced the documents by making them searchable.

As I pointed out in my blog post on this litigation last year, the very fabric of legal research is so interwoven with precedents that a holding for the plaintiff in the suit could have dire consequences:

"Call me a cynic but aren't a huge chunk of the legal opinions written in this country essentially "derivative works" based on other peoples arguments and analysis? Don't judges (or their clerks) take whole paragraphs from briefs and drop them into opinions? Don't lawyer's draft briefs by selecting text from judicial opinions and legal memoranda?

Is the whole system of common law precedent to be pulled from Lexis and Westlaw and put through a textual analysis to see who had the first "original expression" of various issues?"

A logical extension of a ruling for the plaintiff would be the removal or restriction of access to lawyers briefs on Pacer, Google and other open web sources.

Wednesday, February 6, 2013

Several weeks ago I posted a survey soliciting information on whether law firms highlight information on their non-lawyer staff contributions on the firms public website. All firms are facing increased competitive scrutiny and are often asked to demonstrate how the firm is using innovative approaches to client support and staffing. It would seem logical for firms to use their external websites to promote such initiatives and innovations to clients. I know of many firms which have undertaken fairly dramatic and innovative initiatives which support the firm's value proposition., but in general, law firms are not leveraging the PR benefits of such innovations.

Describing services. Here are the services in rank order which are most commonly recognized on the firm website and provide some description of the value of the services.

It is obvious that clients choose firms for the expertise of their lawyers not for their staff. However, in the current competitive environment, it might make sense for firms to highlight they ways they are leveraging people, process and technology as a differentiator.

Contact Information Only about 1/3 of the respondents indicated that their firm provided basic contact information for their Directors or Chiefs.

Feature Services. About 1/3 feature services provided by at least one administrative department.

*Hat tip to Melville Dewey, 19th century efficiency reformer, founder of the first School of Library Economy, and inventor of the eponymous decimal classification system based on Sir Francis Bacon's outline of human knowledge.